Decoding Employee Retention for Business Success: What Makes People Stay and Go

by Angela Loeb

 

When you recruit well and select the right people, it’s an investment that pays immediate dividends. On the other hand, turnover can be costly, especially considering that the total cost to hire a new employee can be three to four times the position’s salary, and can adversely affect the business’s performance.

 

David G. Allen, Ph.D., SPHR, author of Retaining Talent: A Guide to Analyzing and Managing Employee Turnover points out that in one nationwide study of nurses at 333 hospitals, turnover among registered nurses accounted for 68% of the variability in per-bed operating costs. He adds that “reducing turnover rates has shown to improve sales growth and workforce morale” and that “high turnover among employees with extensive social capital can dramatically erode firm performance.”

 

Essential Concepts

Whether you’re directly addressing any potential retention issues in your organization or overseeing others in charge of this area, knowing a few essential concepts will help you and your team to be more effective.

 

Types of Turnover
There are two main types of turnover:

  • Avoidable turnover stems from causes that the organization may be able to influence. For example, low job satisfaction.
  • Unavoidable turnover stems from causes over which the organization has little or no control. For instance, health problems or a desire to return to school.

Sometimes, the line between these two types can become blurred when what appears to be unavoidable is addressed by your company. Let’s use the example of an employee deciding to start a family, which is usually considered an instance of unavoidable turnover. What if your company decided to offer paid maternity leave, on-site childcare, and other benefits or solutions to encourage working parents to stay? In this case, unavoidable turnover potentially becomes avoidable.

 

Why do people leave?
What the research says about what employees want comes as no surprise. A recent survey conducted by Qualitrix, showed that the top drivers of “Intent to Stay” for employees in North America are:

  • Ability to meet career goals
  • Aligned with values
  • Pay fairness
  • Benefits meet needs
  • Believe company has outstanding future

 

Can you predict an employee’s decision to leave?
Allen shares a list of the many possible predictors that research has revealed, but he highlights the relevant predictors noted below, saying they “merit careful attention”:

  • Increased withdrawal and disengagement
  • Decreased quality of the relationship between employee and immediate supervisor
  • Decreased role clarity (including definition, communication, and reinforcing of performance expectations)
  • Decreased job design (including scope, promotion opportunities, and ability to participate in decision-making)
  • Decreased workgroup cohesion

 

Why do people stay?
A great way to understand why people stay is to look at job embeddedness, which is “the collection of forces that influence employee retention.” In other words, these are the psychological reasons that influence employees to stay with your company. Researchers who have studied why employees become highly embedded in their jobs or communities found that there are three main forms of embeddedness:

  • Links are connections with other people, groups, or organizations. Employees with numerous links are more embedded and would find it more difficult to leave.
  • Fit represents the extent to which employees see themselves as compatible with their job, organization, and community.
  • Sacrifice represents forms of value a person would have to give up if he or she left a job. Might include financial rewards based on tenure, a positive work environment, promotional opportunities, status in the community, and so forth.

 

What Next?

Now that we’ve covered these essential retention concepts, maybe you’ve started to form some ideas around what you’re already doing, what you might improve, and what you might want to newly implement.

 

However, before taking any next steps, you may want to consider Allen’s advice. He wisely points out that “simple one-shot retention efforts (for example, a single employee attitude survey, a one-time bonus, or a once-offered management training program) are unlikely to exert much impact over the long run.” He says, “To manage retention most effectively, you need to engage in an ongoing diagnosis of the nature and causes of turnover, as well as develop (and constantly hone) the right mix of retention initiatives.” And he adds, “That calls for thinking about retention before employees are hired, while they’re working at your company, and after they leave.”

 

As experts in the people side of the business, our APW team would be happy to help you with employee retention analysis and planning. Feel free to reach out, and we’ll schedule a time to visit with you about your needs. We’d love to assist you! 

 

Contact us at https://austinpeopleworks.com/contact.